DNKN - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Dunkin' Brands First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Stacey Caravella, Senior Director of Investor Relations.

You may begin.

Stacey Caravella

good and operator, you, morning, everyone. Thank

Officer, today's Chief Executive on US, live Hoffmann; Chief and call being replay. call of will and Chairman Dave Financial Brands Dunkin' Brands' recorded Dunkin' and Jaspon. Officer, webcast Donuts Today's is be Dunkin' Speaking Kate Nigel for President Travis;

made language over also included statements in earnings release Before call I'd to forward-looking to I turn call. remind on like to during our comments applies Nigel the everyone the that the our

found website our be with along measures of on reconciliation can corresponding with any release Our on mentioned investor.dunkinbrands.com financial GAAP non-GAAP measures. the their call

Now, over call to we'll turn Nigel. the

Nigel Travis

Stacey, XXXX which national weather. rollout thank call quarter results. today's These intense joining of menu results included the simplification, against everyone activity, adverse you. backdrop as Thanks continuing as were well for tough first to discuss competitive our delivered to a

and an business course, consumer and for to retail increases QSRs US not the on market wage macro growth. and, and environment. As we brand. our changing, calls, I share. all These designed transform in are fighting plan in the to positively low changing is realities feeling are challenging prior number said to fact, Dunkin' wars on-the-go we into retail Dunkin' are of is the these responding Donuts Minimum led among blueprint franchisees is current restaurants. many Value are one increasingly changes seeing the the with prior A environment beverage immune three-year for calls, unemployment. It and for

operationalizing quarter the was with the plan. as about have be, would his pleased in I'm Day are while being made let with admittedly choppy, along it done. predicted our truly February, And our me franchisees been first at excited have work you, progress and performance that tell the with we we outlined As Analyst And and hard work at blueprint. Investor team just Dave this our Dave

over few to hand the to out like a I Dave, call for achievements Before notable would I quarter.

in growth and quarter, net these new continued apart. growth, the were terms of globally, First, growing locations our Dunkin' the a sets locations of our XX and trend, XX That in likely as net country the concepts in adding terms we us retail restaurant unit the fastest achieved franchisees of as well franchise fastest strong large domestic operation. in

sales products grew Branded by than retail Secondly, data. according quarter, IRI of CPG the in XX% to more Dunkin' first

brands million ready-to-drink Our retail total in portfolio both of $XX sales million across sales. products in delivered $XXX QX, including CPG in

again, strong, first is of course, later you quarter. of Investor our repurchase first a into and many shareholders. unique the entered which on of our during share in $XXX illustrates have later. products unveiling iteration we capital U.S. the that Our on Dunkin', experienced CPG, to The Day. continued our the highlights to in utilize share Kate. More commitment of on next Dave the we included generation accelerated our growth to return of the a balance touch new from industry of in sheet which strong program Other quarter solid million And, will repurchase pipeline accelerated

menu. also knew progressed Dunkin' with in to an system from effort and we confident blueprint, unprecedented new if the knew X,XXX X,XXX while for results, Lastly, to were do was that it menu to simplification would the XXXX the simplified it thing test restaurants highlight I we with right we a the like we going was

performance Hoffmann, will quarter. in pass of team execute were my Dave, Dunkin' the friend, over proud took into you I'll that despite program, are it to of this with Donuts detail. Dave to the We that, this in of the get discuss course, And in facing the QX the we other more U.S. effort first to headwinds

David L. Hoffmann

Nigel. Thanks,

As is transformational investor our modern strategic for about date, we Dunkin' the brand. the sequencing and delivering on U.S. expression growth about of blueprint more at in calls all and a have earnings that spoken previous will result

are complex, off most which of success franchisees slow the well of we in have XX% the with Their We of of elimination this in to Fundamental partnership making simplification. was as as we of This of on U.S. were a the system. and to the process. them and with reduction a rollout multiyear menu progress and level happy the with the are they the about items, Today, many completed and undertaking during Dunkin' the on from as first of another brand. products, XXX% how resulted menu unparalleled, positioning was strategy. simplified support element the in the collaboration pleased quarter, required to with And restaurant. momentum of built a streamlined are beverage-led said, hear of optional Dunkin's on-the-go plan this Nigel is critical the moving, massive pleased XX solidify are the with franchisees we our blueprint rollout menu national as the we

to We in the to what similar following about the store expect markets. launch, experienced test we impact of months an comparable sales the to see in points XXX basis

by ultimately, an people enable in turn for restaurants. the and continue environment We simplified restaurant complexity that deliver long profitability, over our guest will drive improve margins. a of run, increase is to level a believe to crew the taking order franchisee the accuracy, better out in experience, investment the This menu better

Okay.

by flavors in also growth sales breakfast first the sales, sandwich. setting benefiting biggest Menu with roughly sales were quarter. for first national to Looking customers basis XX store our From comps. Dunkin' bacon Scouts traffic Girl and was record that down winter on system-wide category quarter and Comparable for that weather which breakfast promotion comp were chipotle with unfavorable value traffic a QX estimate simplification, X%, beverage growth. driven We results, together brands at biggest terrific and sandwich overall categories declines. premium and headwinds by driven the as was from drag were storms store iconic local sales a new focused U.S. accounted by standpoint, combined quarter offset sales point grew promotions a X.X% two to more and brought brown love. sales the sugar our another ticket

proof Tuesday, Dunkin' events quarter, to we a brand Day, holidays as a celebratory St. this the consumer on continued Valentine's increase that see transactions Fat of product. donut our more like for year-over-year is with During course, March record daily destination XX% donut Madness. Patrick's on attached Day, and Valentine's a highest Day, We XX% had than of with an sales past and

the in a fun make particularly playful leveraging donuts see to continue deal holidays way. will our Dunkin', You us a at and about big

Looking drive products ahead, prices restaurants. to guests and traffic at committed we great ways to to we our are continue our into explore all-day offering tasting will cravable compelling

shops more We in value which from of a included menu as the million customers testing platform new it drive and our four from our handful area snack total weeks our began program guests. profitable program blueprint new shifted provide XXX,XXX deepen adding the a are for engagement and using transactions. Perks against our primarily incremental a to tool program focus product as old, offers sales approximately the strategic to with strategic nearly Perks With members innovation, offers a everything Run using progress to value has an quarter few ago. first now to our testing Dunk'n Boston platforms to years loyalty the in during loyalty like nearly our of Other to X.X relationship

spend giving On-the-Go Perks and driving will in member sponsorship adoption on engagement more and by We ran it hockey the mobile through more We're conjunction like the with personalization. the our ordering on and mobile the through initiatives of visibility balance women's spots navigate order increasing focus the also U.S. Olympics and to continue our for pay more and between dedicated Winter one-to-one marketing during recruitment in team. focused restaurants advertising we

percentage During base. business our our overall as we brought users the new On-the-Go Olympics, our and a among usage highs as existing transactions in record increased more reached of

retrial of On-the-Go, the strong we continue who at to expand continues guests to use As approximately be number our XX%. rate

focused strategic brand our in Finally, on accessible. Dunkin' making are more we the blueprint, with keeping even

heritage First, we saw as our Cookies category, channels restaurants. to goods and the and branded growing of with feel our strategy during bottled Baskin-Robbins on of right as coffees both strong. base; while packaged branded remains the through quarter. consumer the outpace in with Recently, Cream, mentioned, progress of & double-digit we sales line flavor And, flavor, offering the well. growth launched CPG products continue ice restaurant Dunkin' cream good concurrently ready-to-drink by Retail second, we ready-to-drink K-Cups iced our made Dunkin' a quarter. Nigel by new outside first is which flavored introduced

to our our the and or CPG presence them leverage We Baskin in markets, brand bring developing expose Dunkin' consumers build to restaurants will our new to into ultimately for full experience. continue products

restaurants, net in QX, restaurant growth during for As new completed quarter. of quarter the XX Dunkin' same franchisees in as remodels the Franchisees U.S. XX also XXXX. the first opened

excited markets Corona, quarter. the the and mobile especially debut the offer two during lane Quincy, at California. the restaurant U.S. to was brands' the iteration of ordering. of are dedicated of including future, restaurants store generation exclusively have the concept in the our unveiled next We first drive-thru Massachusetts, first That first-ever These to look

development the Day, have and us received more many committed they is well. brand. design. key generation Day response into as top all strategic new bring convenience, customers we will choice on-the-go turns our To-date, and many to give have and of on and from next-generation on even be At to and profitability change, opened on-the-go positive, unparalleled beverage-led locations, restaurants, which our restaurant driving sales you the franchisees comp and of Investor validating into of the is The guests prototype embodiment is our are making for providing responses growth positive pleased to initiatives blueprint for both focus for a noticeable we Investor as remodeled on the the know designs are shared them has how true main design XXXX customer and that to our been overwhelmingly quality openings Dunkin' new together the transforming with are next we guests growth, to We we at our of of store key next-gen and The brand. we franchisees. a an handful use in from

we brand have BBDO creatively close marketing will We to agency, us public. and extremely accelerate are vision our help help me transformation us of named forward. initiatives brand, by to think the our further excited articulate saying to let to Worldwide, Okay, recently creative to going are believe a partner they so about new the best extremely, the our

our heard great, U.S. and track I'll back about deliberate, solidly cover and come. over say all have As is for growth And it to franchisees sequencing, turn for to U.S. that, with on ensure great before, iconic Nigel strategic transform this blueprint International. with to are me you years to Baskin-Robbins the and brand Dunkin' success long-term we now

Nigel Travis

store and desserts comp sales for beverage categories. thanks. of XXX our U.S. as Average the shakes cold, the were Dave, our basis our and growth down growth, put which we we item are largely a core the declined from impact. the negative came approximately weather (XX:XX) in Baskin-Robbins on the in optimistic quarter. focus X% up Weather saw the category, comparable digit traffic Despite quarter, wet about renewed accounted result of during but Increases was beverages during QX, the first for double negative ticket the reformulated largely of strength during quarter. category country. points newest dessert across

value Celebrate XX, incremental with and programs cakes sales. starting performed driving $XX.XX, at well and all our Importantly, transactions

we opportunity changing to strategic BR stores and and drive-thrus with Baskin-Robbins more a bit mix, currently visits subject talk to consistently in non-drive-thru or existence. to just of occasions but drives drive-thru are have for don't this to Dunkin' little often, as so locations locations higher a aim very the Baskin-Robbins, about through similar a XXX add outperform locations. which repeat Now, beverage drive-thru we

Baskin-Robbins a is Like a campaign campaign. the that a Me more from shift audiences, feel marks joy The they geared for and product-focused people Additionally, advertising emotionally-driven catches unabashed new we Baskin-Robbins away and called Got shop. launched when Baskin-Robbins optimism towards the advertising to younger brand strategic campaign visit just a

So media has feedback positive, customers a social significant far, in consumer across been seeing from engagement channels. the uptick

product we with work through and during innovation, along and International, driving the to offerings, our continued accessible the customers to quarter, more International licensees, stabilize by our on to making businesses, our brands focused traffic franchisees on through technologies. and value Now,

opportunity. and outside shown call designed be encouraged restaurants We tickets. Dunkin'. out particularly Dunkin' had the have important generally continue XX and and partners Donuts But cream consumption cream have sales that of in capability different U.S. the East average store more of through through And brand's incremental more a Sales in across brands expanded with and working the business increasing and throughout accessible I sales to about on goods. these are consumer our system-wide be Asian across remains franchisees incremental International points, ice delivery stores, start of the success ice through aggregators, through centers located XX restaurants newly terms in use eight Baskin the by more Baskin-Robbins in-house as packaged cream of and Delivery sales making Based our to to scale the that's with Early good on the than of increased driving roll ice markets an gallon direct. focused the markets cream the outside programs the tests together, delivery, markets, we in than design are have results additional year. experiencing, International new year, Middle and to underway touch International continues in both brands. we two talk third-party ice

turn over to results. to will financial I Kate it cover our Now,

Katherine Jaspon

Thanks, Nigel.

recognition $X.X gain million by operating ice year compensation of on compared rolling lower the million, The from and income. expense the primarily to tax tax to were increased in $X enactment The and financials, due increase increase the by tax of year have million, and income I'd year result $X.X prior XX.X% $X sales increased everyone quarter Before a cream of into and first to in were an been the estate. operating new from first in of net in income reflect our products. decrease in and These period adoption from increases Revenues for that well. $X expense increase by the approximately income decrease tax I due net system-wide prior increased costs, well first interest by X.X% prior offset royalty and a respectively in Operating period, the as offset the increase as primarily or million a related compared income the cream driven the Net standards, million or revised in in adjusted the decrease advertising results reform, quarter our income decrease of year our offset the other and result income, real sale related and net the income of an XX.X%, X.X%, benefits to increases as of revenue dive of as G&A refinancing $X.X well a tax results our a like X.X% million, year approximately income joint year due XXXX. margin income to venture, increase growth, first or a commodity primarily share-based the period of prior quarter expense, income that an $X the as adjusted over to and and expenses. a remind compared income approximately ice a quarter excess in income quarter sales adjusted fees and as for million Korea period, a operating as net net the prior by income in and result operating increased fourth prior decrease for in to income and a was respectively or by driven period, net royalty in in in or income fiscal as rate, to reduction adjusted of primarily operating period. adjusted South in the the

decrease tax period the in including prior from first to adjusted outstanding since a per the for income of increases period, compared $X.XX effective was shares the primarily adjusted XX.X% well of The shares the increased earnings the options. diluted the Our rate impact earnings in year income shares and XX.X%, repurchase of quarter year prior respectively by offset the as first XX outstanding. and to excess share decrease result per the and XX.X% as from XXXX, quarter tax $X.XX approximately in for by percentage as Diluted of of to points quarter to share net due net exercise was stock our fiscal a benefits.

XXXX first Excluding adjusted adjusted the tax of been excess would and have of had quarter respectively. years to per EBITDA XXXX to X. impact share of recognized diluted X.X the a the the for share fiscal benefits, the and first earnings debt diluted per $X.XX lowered At end earnings quarter, by $X.XX ratio we and of

XX%. fiscal now year tax expected is quarter, million the We quarter of full impact updated tax now of average XXXX for This $X.X effective tax year into program which fund we expect the and first marketing and during and with Of and million In approximately with XXXX. entered quarter release cash $XXX our $XXX to full which $XX updated million the inclusive rate outstanding points. press fiscal of to of quarter, performance. ended approximately reduced $XXX balance of during million, the million million $XXX during cash pay our expect cash sheet. and million this the $XX first XX the tax XXX the cash represents basis shareholders. restricted QX flow rate the the programs, reiterated generated excess shares on cash the repurchase dividend by in recognized includes morning, During our approximately regarding share approximately million the our free associated an And approximately weighted benefit our effective We card we rate cash gift in our targets balances. used XXXX certain we quarter

in of periods the future quarter XXXX, reminder, adopted new the benefits. dependent we tax benefits fiscal tax accounting a first standard and including for share-based a vary Excess payment transactions, during As will excess subsequent our in on quarters number of guidance any the our material of potential in excludes fiscal are amounts benefits excess impact from and future options fluctuations employee stock XXXX. price. exercise stock This tax

earnings now which impact of of of diluted to count and revised share per year the $X.XX, diluted result the rate. these share updates, tax a share to adjusted $X.XX of $X.XX, earnings reflects As effective $X.XX we expect full and per

regarding important Dunkin' quarter U.S. for blueprint made our led with our support how concepts million plan $XXX the and during the Donuts beverage in Lastly, to the we the next investment franchisees, along progress deploy to positioning. we generation

However, there P&L call or start to flows that, I open it we to And cash you the our to to will was the accordingly. no our material turn do impact investment, the deploy to quarter. Q&A. the to When will provide updates operator during for over with to we

Operator

Our first Palmer question Capital is from RBC Markets. David from

now is line Your open.

David Palmer

wanted just Thanks, Question get the I good the out on this way morning. to first. returns. of

in you good new by return second this was the about ask Thanks. think will wanted their One thing there in are ready seeing you Northeast. franchisees of have reimaging that perhaps is Could of you growth out of franchisees then the on starting you basically, And XXXX, touch and that XXXX return format? are hear a and for prototype the the do poor on just unit on implications in the short markets investment pace and units the theses scalability, Dunkin' prototype to for returns for growth the the West? outside the I like new

Nigel Travis

to Okay. David, straight and so over to we're and pass you there that lot cut a we're try going going through Murphy. Scott there's to

Scott Murphy

the for thanks David, question. Hey,

the at cash a on top the for all moving in top forward. end the target of what but We we the markets states those in have seen, XX% with coming that well that returns, western seen range. Investor of at of results emerging talked Day for not XX top states, have our are those ranges Dave gave Investor to about actually we we very at growth cash at end in of top terms Day XX% as only happy focus XX a actually our development In terms in

David L. Hoffmann

the And we prototype, David, for have on that will scale. new ready

David Palmer

you. Thank

Operator

you. Thank

is from question from Morgan Stanley. Glass next John Our

is Your open. now line

John Glass

much. Thanks very

On at and I you the a you comp time first when of is, from then driving rationalization, you the of at One quarter? period Dunkin' split got it perspective, us improvement the how there's Investor you an duration short afternoon? much afternoon impacts questions. was of comps, impact been sort on might negatively of of you think from there if that? the impact a in comp. the And a you of Day, have. couple menu look versus when suggested can the I any sort update What's in know morning said

with on great. rolled duration longer? that help you seen your come in have As – would in terms of of line expectations the Thanks. negative you shorter, that that impact Any out, of sort be

David L. Hoffmann

question. Yeah, yeah, the we in for your look, thanks throughout it feathered quarter. And

how but felt long people, that talking more a environment at franchisees. over for it investment about our was short-term haul, we're the better like work our better restaurant known faster worth our basis accurate pain us. that. are when ultimately, on for of It margins is and as a customers, we the for experience certainly for still for XXX%, and point So We've with always a long-term we we're track a headwind we impact view bit gain, XXX this being

in got and with consumer you in stores QX. That what on has and testing line that line. we in early, If the XXXX we're been it's that feedback in the been rigorous rolled out certainly very seeing everything recall, we predictive was

like will So the built and we a at need menu was you slow we occasion complexity, in, but the on year believe question seeing came for and lot than in to go Dunkin'. consumer It's stop, different It's things, PM dilute a a others, new the Simplification year. we as of more that that on. see of AM. we're the get PM. win the erosion in different throughout will items innovation absolutely on pit that a moving go we food putting start the To from what PM, complexity out, still continue on it We will see still PM get as start food throughout and we your way looking state other that's lot your eliminate a That's consumer. get for we items.

of created However, branded going growth will We'll that room afternoon specific with Dunk'n forward the iterations very to be we for Run simplification. various PM test break. the

you'll the So our we that other from here go $X, in start the seeing accident a after of scaled, April. our coincidence throughout sequencing it's more year. that or platform simplification And was as deliberate no thing standpoint, value in $X GoXs, we $X, feathered

So with we're but to more that, to have but we come more on pleased progress, lot a do. work

Operator

Thank you.

Our is Baird. question David Tarantino from next from

now Your open. line is

David E. Tarantino

good Hi, morning.

on XXXX. a Just question for outlook comps the

some You guidance giving is confidence in assumes this the are guess I point to to willing comment, soft in to what up held if that And you it good business a you earlier? year the I'm outlook secondarily, of pick that a start the just momentum as comps year in And as Thanks. the unfolds? starting year. the see despite headwinds pretty underneath you're guess wondering, mentioned at I some underlying trends, the you

David L. Hoffmann

go point your well. negative we progress. for around Perks basis mentioned all that simplification, was from in very and, this but Nobody with stuff our for things to Tony we're There's all a not pipeline XX you'll put with headwind going all QX. tool for X.X guidance part do, but look we a we vigilant, is us intentional still to enthusiasm brought franchisees. again, deliberate a all we $X, the in And machine, not I -- when GoXs, nothing start our as pleased our thanks knocks how are I talk weather, of These And Throw in is lot for from in et blueprint to part as wanted we're and deliberate was bit X% engagement And that for and deliberate place one-to-one a the and this certainly deliberate the the X% sequencing. growth he's but cetera, building team, in GoXs, a We're track continue all comps guidance here. celebrating that about were but from a around on $X, look, true do the out the year. that we navigating what and of about to year. Perks seeing play we're plan sequencing at around and David, Yeah, a $X, question coupon of again, throughout his off the just say, full the is as year.

Nigel Travis

headwinds QX So have else. to lot think involved that, talk run of excellent, team its let team advertising me and simplification I we in and right, everything outstanding, with just was was everything, say, own a headwinds what about particularly of was members, all had that in But I'm add QX I didn't forgetting There turbulence the changing changing not Dave and just you day-to-day, QX was in know. his it. agencies. given I as actually think given is we the really the result Tony to

feel foundation building are of chin. Dave past, really for being I team on good comps the so know on David, U.S. It's overconfident really accused So, I and good. the his that year have I But I'll the take that about in been Dunkin' and the

David E. Tarantino

Great. Thank you very much.

Operator

Thank you.

Our is Jeffrey next Barclays. question from from Bernstein

now is line open. Your

Jeffrey Bernstein

growth, see any talk actually competition, XXX,XXX increase, a Great. importantly, intensified. coupon picture, just seen it's you've ever you Nigel, release? Two And members. Thank Perks, broad a you DD about much. more just U.S. there's remove to a comp what's then – can with talk in now tough competition maybe talk I'm that, the been just you intense Dave, that happen bit the what that whether that's competition. would That's have the you But from could the if take I'm the more just X.X I'm One, Dave, the just little that's the would whether specifically, million that to change wondering wondering not would about around one-time. as Obviously, the you question. sentence questions. nice if it say can now, just bit little Dunkin' weather from exclude the you a wondering easing. the backdrop And very we long-term machine. you opportunity, the press big anticipate what

about Now all engagement. it's

So, you. that I'm just one-to-one presumably wondering are if you – you could marketing, talking might comps. benefits for talk Thank about from potential what about mean the

David L. Hoffmann

we is, thank on which we of is Jeff, wars, call comment. fair our lot et Yeah, competition. the other is what XXXX, X:XX, around And the would work not two-fers a, where a In cetera, of. way, chase – breaks, to do header we going We're work the you. lot say of the afternoon PM customer. to various we're for of out competition A the this GoXs what a offers. Throughout to right going around I under trialed poke X:XX came value bundled program, trialed

a we XXXX of So heavy-lifting in did lot testing. that

in we some no it's growth, simplification these that and do simplification we just of introduced want $X Now have innovation menu coincidence not value, that's for other I'll say the our room on scale, around creating to PM. but and initiatives campaign April for we that $X, like value again $X, all because about also was what

years loyalty of as that, the this share to Jeff, and, frequency, believe to to into Perks program. in easy We marketing. making I'd and say, we're on view targeted the an a shift a agreement this relates whole guess turn A We into on is for the want way and the would based brakes aspect lot offers. the more machine offers, four couponing to it. missed on our tap decided to done, similar open to frame move me app As it's coupon On-the-Go, engagement intent. more we it I Tony one-to-one customer our and And as a towards start customers Speak but a of. and needs be more is work we what the our more versus bit plan towards is and Dunkin' violent

Nigel Travis

known competition difficult about you that's Yeah, easing. Jeff. a time I a long have question really and

think I've So trying about it. been to sitting here

to of lot I big signs one struggling, I some are well, if – some about you large at naming the names. The in pressure stores. growing different are fast there think time, is what a competition, announcement without masses the that would look you, particular from without chain competitors everyone say continued one stores industry. hammer which recession, else remind we've closing just hundreds And the about of closing was even at away in I of

unit very economics. are on focused we the So

think I are to we is we focus continue do different. why on what

the had are quarter, I earlier, the XX% about truly Baskin our drive-thru. excited stores we We about if a think drive-thru. of Dunkin' you opened I in take talked Donuts but

at it. as as see we we that's we I the one a beverage-led the So on-the-go differentiator are look brand. number that real mean, way

going about ever So throw the talked to we'll up eases the Dave it have a Perks. I And I'm value but sure of because day you're to tackling I'd there. where aggressively. not think always competition, we're competition get in lot

up on a to that It's we'll that I believe continue value differentiating truly good, got we've build again. we business with direction very we've think franchisees. strongly. our linked our and It's

So I that look does though, forward when to headline appear. day, the

Jeffrey Bernstein

you. Thank Great.

Operator

you. Thank

Jaffray. Piper from is Miller Nicole question next from Our

now is line open. Your

Nicole M. Miller-Regan

more satisfaction into what wanted Thank you. if guest are the and wants. they're to It from wanted Good you then that, to the still, comps what go could that I satisfaction morning. back maybe I negative prior also customer in understand conversation the see a confirm like different heading direction afternoon and sounds guest on understand question, PM they're the how scores. and scores, to

seeing more Day, XX (XX:XX) for linger back X.X they guests, Analyst Just think I I and was to minutes. minutes on or the so they it want that thinking to reading spend X remember

question is, don't convenience? more little they over bit a you. an So real of Thank my want experience

Nigel Travis

going question give that to Scott We're to Murphy. challenging

Scott Murphy

you there's And from lot around making franchisees innovation, crew. I doing simpler most think in having menu, better a simplification, experience, products. the think accuracy they through afternoon, a the When right. just business the little probably but we're So more I is you're with through having thank They guest technology piece things then the especially a sure in the other the experience, question. want a our importantly, so accuracy, friendly investing want our about are for Yeah, first, right?

doing we're drive now that right the And the is trying so in that really improvement. restaurants experience to

David L. Hoffmann

created Yeah. work was afternoon. all – really are The done we've say the customers as Not know. going on segmentation on equal, to in, Tony's only great come this you some other thing I

need like a the for it's is And is that is looking than we the the that in believe in of et process get customer as thought looking in out for That found stop. to have just in, with a consumer have experience. into different fast be But we different the And a PM AM. in We pit segment people's XX, the – getting the and that wants take get look, defined work, and well occasion think, at will in a afternoon, a but our advantages. there of segmentation you've consumer So transition that states we for we about, on faster our population there's not is there's we plays do I AM. talked things with incredibly X, simplification, lives. looking cetera. their get we're way, and right Dunkin' We're

when And the the in items and That's Dunk'n going not around to those comfy some players. trying out intent. not house so that's other our to couch We're afternoon. we're news targeting That's about of we're we what talk we're Run target. doing coffee what specifically and the food what

Nicole M. Miller-Regan

comp, an they're or which than says up you just could satisfaction maybe reason, scores the steady lower guest they're heading down, just AM, they headed opportunity? so explain but bigger numbers, even for are Or on already the it's And some state? really and/or still

Nigel Travis

Okay.

satisfaction alluded about he win that, through think magazine opportunities We're though, on accuracy. which our I reveal we investments want that when there's improve. statistics of I to, echo are published lot increasingly, that there A the that going a research said as ever drive-thru. QSR recently very noted the lot the ever awards, constantly guest that, Brand and Scott is Keys numbers. don't to we firstly, All I always satisfaction. know, the talk focused loyalty on we about we we What So demonstrates strong were speed. think of a behind speed I one number what but to customers And want

picked I think up yesterday. by was that Bloomberg

I PM and Day. our continue at another work products attribute, all think Investor And on everyone we the opportunity that's kind agree providing, saw the is So and Analyst we're to we'll major it. that of but an

Nicole M. Miller-Regan

Thank you.

Operator

you. Thank

from question is Andrew from Charles Cowen & Our Company. next

Your line is now open.

Andrew Charles

price the And menu I rolling Kate. a Great. presumably question and One franchisees' somewhat the elements. sales spot gross questions. quarter coffee two these intensified Obviously, offset a market for What got out? fair margins favorable you backdrop, for food then was increased net have value impact but offerings benefit separate as book Thank you. to in of is the Dave. the simplified

you better no the the to as that but Thanks. of called revenue CapEx do at Day? in magnitude the Analyst the You $XXX in flow-through out into you sense impact brand visibility start quarter to versus from pipeline of have investments, investment, have a better million you offsets the described

David L. Hoffmann

question. for thanks Yeah, the

and As it that positive impact, margins, have impact on relates one on costs food just called the to it seeing we're past, more is I but of higher, to the with in out of been clearly simplification, eliminated. complexity, it has out specific the we and haven't some products been have some Again, as of was our pleased objectives make we complicated and that that. what of we're slow-moving

importantly, would people. margins. been costs work franchisees that in our natural a food pleased the a that, it's gross about So environment that investment better And really and more and improvement have with for have but it's an

that so that. from of the faster, customers. restaurant a And residuals primary flow better deliver experience all margins been will more of the accurate our can Kate? we all And that's driver of we of this think for so

Katherine Jaspon

et And $XXX the working and as investments your the cetera. testing working of with our franchisees I question in progress we call, said to significant be will but between on still we're Yeah. million, made the through what on the regards stages in with vendors,

the we we will this soon any at we at Day Investor time, or as had the to have discussion do. guidance, but you updates don't I So update that as

Andrew Charles

Thank you.

Operator

you. Thank

Our next from Matthew from is question Guggenheim. DiFrisco

Your line is now open.

Matthew DiFrisco

an Dave, the there's on you drags in back, wonder comps? see X%, you more to comp continues question or look I the happening. around back trying as a one menu I basis. around weight so XXX greater in Is still wonder the basis the some acceleration point you. us if comparability both little have what maintain not why the confidence there's guidance, the two-year year Thank to if that that I acceleration that definitely sort goes I gives there that guidance what could of less progresses comfort guys and start and implied XXX where lapping about – these go more as you bit – of half as higher back to comfort I basis why point could wonder give on. a of year of the LTOs, the year in for you when the removing talked we simplification. see caution get I to the just you from acceleration

David L. Hoffmann

the Perks. value. the Yeah, headwinds talked QX competition in deliberate tapping our what we before, was at – was as on biggest that unprecedented seen no, weight it's piece say haven't I about, simplification, primarily unprecedented into which flowing other from the around brakes mentioned, directed media look, And we QX and deliberate around would I

three-year and menu have in robust on. what's look, innovation netting, a For us, got team though, our have on Tony been pipeline working we that

that visibility testing. got have We into

We a we were on just we're investments the working. got collaborating it's how value, in like our it's is clear what that franchisees overall have We aggressiveness the around making that we quarter. on profitable So that we stronger progress and strong throughout the value with franchisees, but view are the value committing also of the our like to like voice blueprints.

that investments assume $XXX and unveil that it's about around going to the we all across scale and it's safe touch the that, are get XX million, units, to going are that assume next-gen prepared system. you point be can but various it's elements So not to things to about Kate's of to to – restaurant it's not are how but

move look, remainder of to we're you you that to the in confident are and hear quarters. going but So, the start as are the throughout this, year seeing about we more going

Matthew DiFrisco

Thank Okay. you.

Operator

Thank you.

Our Matthew next from Evercore question from ISI. McGinley is

line Your now open. is

Matthew Robert McGinley

to question Hi. and first is the snacking. My implication transition sequence on the against

you ones versus are the are it menu took does to fill that the that XXX harder replacing be that that you a repeat have off, and going when re-acceleration from basis get to trying that on right ticket items we the sense Just void items? to point have that see now of lower make now. Given until trial the hole a gating would of builds right that snacking we you the

David L. Hoffmann

something just Yeah, GoXs our of PM is we $X place. baseline we have that no. about but again, we creating Fair on and, are is got going in test PM. attachment. we're the from right love now our momentum that. farm what in not Again, is are to point, other markets betting price think seeing things that of a the be we there's that at question point part We all are price looking

into have And clear so visibility delivering. we and what attachment that is

when And look at seeing confidence so are and like what attachment. something we is around the Run get how we that's we the Dunk'n

and testing attachment. and yeah, that also predictive something around check it offset average dilution that is but we work So, the against we always nature consider in does the testing of around that that what

what So us the that's gives that. confidence on

Nigel Travis

that would I actually to going will assertion of actually, think Can our That challenge say I they it talked bad. is build that bring in a I way. different said in top you a to the price Dave item attachment in It to about. just the just but that want view it lower add And traffic. that? I on then

is put in I this the strong the to fully plans that the Tony So go think are and for previous and exactly guidance confident question going the year. back the Matthew, have I given too from to right want think the and I we've repeat, Dave I other really together way to am

Tony Weisman

pair with we to of a of only the which we're it way think up variety products looking with a of the at well our add would range and savory. I is frequency broad visit, PM, to think of with hot Yeah, They sweet respect will beverages. that variety I drive the iced thing and a

So traffic to and a point lot is to price for I do going to is see think going frequency. point Nigel's $X we're that that

David L. Hoffmann

new our CMO. Weisman, Tony was that And

Matthew Robert McGinley

have X% thank for the for G&A, to on Kate is the the guidance Great, – year decline. on full you. a your And

is higher the You front quarter? half half to Was were year. that cut the a back some the there little of just bit lower came than weighted in G&A? it plan in a first of more the in that Or expense

Katherine Jaspon

Yeah, it was both, actually.

year came cut, the and that in some this there of the year. in So expenses of majority obviously the half were non-personnel earlier that coming back

still $XXX comfortable XXXX. are down, the adjustment the X% from we guidance million So with approximately off of

Matthew Robert McGinley

Okay. Thank you.

Katherine Jaspon

welcome. You're

Operator

Thank you.

is Our from (XX:XX) next Citigroup. question from

is Your line now open.

Unknown Speaker

Great. doing could maybe differently how you you your non-core have – the Thank a you. what differentiate markets are regards Could you where to your you simplification, menu just markets in in versus in core of food each time those for looking you think same have sort have and region? the you higher do maybe results differed Or mix and benefit? they just are different goals over

Scott Murphy

Yeah, this across is country. Scott. XX% or same the the I'd say XX% probably it's

so to a for customization parts you to of menu get experience One different in from Dunkin' throughout room do We consistent as Dunkin' travel standardized a more of have some of objectives have regional the country. the was the simplification you country.

are or If products we're those of sandwich in P&L. open important are or Southwest have the of to consumers about told some the in important you mix because the South think products those some regional still California, that the us keeping the

Unknown Speaker

Thanks. Great.

Operator

Thank you.

is from from question Stephens, next Our Will Slabaugh Inc.

Your line is now open.

Will Slabaugh

for espresso beverage platform didn't you out. want included the some made strong ticket value I of including sort well and rolled franchisees you. If And sense if there. realize and national particular. as sales in in it know component and/or way profit big are I in Thank ask Northeast. traffic margin that of some in assume to just bundling the a these platform And bump if I sort But and particular recently the core about driver the full was considered morning, considered. in coffee some I you on

Tony Weisman

high. seeing We're Thanks Tony. expected, It's we beverage which attachment had hi. Yeah, very that for the question. the levels of are

it's appeal; to attaching variety, And great it's value; a and for a and consumers they rolling pairing. A, the a we great learned at us essentially sandwiches as on $X, very rate, this at different price and rate the have featuring expected. it's for both And get. with up C, easy and $X, $X point moment: naturally testing, beverages it's So in very by this B, we very to types hot natural iced high broad are that easy of execute to at three

expected out as netting seeing for of And to basket, we we're of well enthusiasm as hoped. as it's So had high satisfaction level levels franchisee that overall consumer it.

David L. Hoffmann

our to point and only afternoon. first PM did and going during as in a breaks drinks price quarter you're won't the see We the our awareness to we with X:XX, and traffic pleased what drive it from continue $X And at that be lever. to X:XX were we with

big rigorous for around it's that's value It's So only continue testing the and lever to we why of iterations going do a us. forward. lever not different

Will Slabaugh

you. Great. Thank

Operator

you. Thank

Gregory from Francfort Bank of is question next America. from Our

is line now open. Your

Gregory R. Francfort

two Hey, questions. guys,

Just to not but brand, see or stores the whether one, customer would you can traffic, any from it, stores in from next-gen back give maybe really you those behavior if on consolidating thoughts the Thanks. lines? terms check you using any reads and And changes didn't? be those plan I breakdown helpful. margin early a then, missed benefit in how the any are remodels customers of maybe And the two, the just in of or

Katherine Jaspon

now. give didn't few the a specific we ticket And sorry, haven't breakdown versus I'm the quarters on Yes, we traffic. for

Scott Murphy

the I'll about is remodels. this and Yeah, Scott. next-gen talk just

you, sequencing I'll few the task, a for lot you in some of guest The so far. so still feedback lot from a and it's a done about out tell labor early. not to We've back steps. it's around process think of relatively but a we've just handful cut see and line, couple crew the only work some just equipment a say I'd of the the loves early them. off, circles, other of very who with positive, improvement the Overall done we've the the the First of excitement, loves task. when positive started and productivity. changed builds But We've

Gregory R. Francfort

Thank you. Great.

Operator

Thank you.

Andy from Jefferies. from is question Barish next Our

Your line is now open.

Andrew Marc Barish

and Obviously, on Two noise you being acted out competitors. some by then breakfast And first there in back more offered give the premium how breakfast big quarter, In couple years back a shift about that on think innovation, into secondly, the fit How products? half we discussion ticket. there Can the know XXXX and of value fourth us quarter? more a higher espresso-based should as kind some of quick we or flattish. of you think context ones, about last lot heading to traffic being premium in that should the kind about about and more does half please. how talked there? the I in of towards was

David L. Hoffmann

QX mentioned the best like Yeah. needed I we slightly performing as than AM No, within for I asset go to at to the portfolio, in again, to decelerated We perform think rate called a through of our was thanks be daypart focus the deliberate as say, It continues XXXX. it's continues Look, but that. But question. to before. the in well them want don't well. AM a be QX, safe but, out and reclaim felt best – as I also a again, to continues part headwinds our performing drive-thru to all

those building to for as you start leading products the to and of tailored with the seeing that strategy get pipeline us, play more value margin, year, beverage-led. menu the is baseline. attachment that we the right food forward is what our high/low believe going at relates half start towards but it we As will back full building sell the is That's why been we've

on just barbell And platform launch the value call but of we smoked (XX:XX) think in with as brand. it premium premium, whether of this drinks beverage so in, the of the the thing. with that's having And a start as double sausage type strategy strategy, next week strong coming right part well, drinks we well as that's as look, you iterating strategy we as more high/low On-the-Go the nice, marketplace. And, our

but in out high/low we barbell, in the first is the to that energy making value that that play So baseline. sure strategy secure to going get nicely, was very the

Andrew Marc Barish

you. Thank

Operator

Thank you.

Saleh from is question next from BTIG. Peter Our

now open. line is Your

Peter Saleh

I wanted about ask and mobile to pay. order Thanks.

you through, piece that small the above well the mix, mix of and And that mobile are average mixing mobile seeing on do given the order of traffic have efficiencies and higher are stores the in in comps, it's system maybe order While coming what pay? you still and the those a overall I the pay? of are some stores, recognize

Tony Weisman

that We you're it. of Yeah, as mobile urban retrial It's it's and seeing, to awareness we higher and that Tony. lend see store those themselves it; And in for Thanks an among right. incredibly significantly order we're even what for and a markets satisfactory absolutely locations, the pay locations question, we're example. is density, is And looking who try high greater. make experience. do mentioned an to what rate before, incredibly high the

So, during advertising as mentioned, the we some Olympics. Dave dedicated ran

As because usage, as you stores, making that in may for try, we're of level consumers higher we some are who mobile aware area it, and trying clearer not of and those they have next-gen it, we see, seen order are pay see loyalty. see so satisfaction to a once the the pickup

And, more for types Consumers well successful And in it's as and, among about locations. most areas loyalty of pattern. imagine, would the also Dave thinking the we're to components as you where really segment. higher are just looking entire as is consumer so usage part that program, a our segmenting certain of store said, natural

Scott Murphy

is innovations drive-thru you bringing terms this seen really restaurant. at the how well. excited And Investor and those it's about the the the Day, restaurant stores efficiency the with And would've a On-The-Go Scott. as are complete unlock we're in in handled and of order – to we're as next-gen It's for

Peter Saleh

for – Great. level me. just expect just pricing the last expect of you And guys provide XXXX? that menu Can net you the menu for then you pricing

Katherine Jaspon

on typically menu never what we've guided we mean, for expect I pricing.

previously price believe aren't where price they our understand franchisees anywhere crazy we said we think taking can take smart. I and

we previous saw in of years. you don't fluctuations so see And any the

Nigel Travis

right Because I it's But a the really and we're million well franchisee's X the working make influence to getting said think I've doing and decision, that. out to the Tony as our good doing decision. there, probably is team good are as job them a with times, think his doing we're job, job franchisees. I

David L. Hoffmann

proprietary Well, is you pricing APT. give some to built a confidence tool we've with

the in out – that world-class franchisees. works a mentioned with team we goes we've here and and They're think and our past. organization, Tony's team our I

in we're the them be providing marketplace. engaged in successful So tools to the

Stacey Caravella

Operator, more time we for question. probably have one

Operator

Thank Okay. you.

from next John Our question JPMorgan. Ivankoe is from

open. line is Your now

John William Ivankoe

Hi, But pricing traffic that the understand less question simplification, kind you are An positive that Obviously, was for of of different than I couponing, for ticket not negative. average the with first ticket national remainder thank direction the wouldn't ticket average value, of you. expect of obviously giving me. it pushes in but XXXX? average there's quarter the perks, lot you and a pulls. different

can Some be positive.

first But what to average the ticket can direction goes? be Some negative. quarter do the relative you think

David L. Hoffmann

– it's blueprint. our primary look, before, focus of a traffic we mentioned have John, – Yeah, is is as

vigilant are this. We on

the us on strategy, and but complexity going we more that in place. we strategy sensitive consumers, thing who the got not also that waiting have call give the conscious, As looking very for only high/low said, a the we as create in believe growth, to for our a those have to premium pipeline are confidence you a for AM. ticket room can in been high assume go cost year, the gives put and were we not that have – price to and barbell it you barbell, right remove doing high/low offering. on visibility guidance consumer more deliberate I is end in pieces but we on price, that strategy, whether We the we We're but throughout the simplification

a innovation, holistic there at create being getting of on the compelling of work also better price part a blueprint menu with but a great experience. all forward. it's So our to around products And lot things going cravable out sell and done plan

Nigel Travis

call to like Obviously, just like have closing we Tony, bring Dave more few my is are would reflections doing things terrific conclude think when you reflections. I the And in and a reflect. with in So better. talent just time I I and differently to that

feedback well. we from execute I think excellent consumer research, on are is strong founded our our starting growth it Dunkin' to for franchisees, and really blueprint

on I sets focus think us digital our apart. global

stand a delivery, copied but that the on That will for our for have approach focus company I industry. I think in think, be game-changer, asset-light future. is And is there. others we international I position as still exciting Our think, a one the leadership total the

setting well that the I and put So together company over the to next are our we compete the up all extremely rest for of feel year and few years.

So you rest calls I thank all with listening I so busy your have luck day, got listening. today. of you the for a thank that, good for you with and know

Operator

program. and in conference. thank for participation concludes Ladies gentlemen, your today's the you This

may You now disconnect.

Dunkin Brands (DNKN) 26 Apr 182018 Q1 Earnings call transcript